Syria’s Oil Sector Suffers Major Losses

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Article Summary
As the conflict in Syria escalates, Abed al-Hajj examines the situation of the country’s oil and gas resources, which have been the subject of numerous disputes between revolutionaries and the regime. 

Syria's oil resources were never significant enough to attract attention or to cause foreign powers to intervene and share rations. But the current situation prompts serious questions about Syria’s oil wealth and its position at the heart of the world’s most heated region. The true nature of the energy and oil sectors in Syria has remained blurred as a result of the regime’s long standing, deliberate efforts to conceal information. Accurate data regarding the amount of oil reserves, investments in the sector, revenues and the usage of these revenues have been hidden and kept out of the general budget. The profits were used to fund the expenditures of the presidential palace and related personal outlays.

When late Syrian President Hafez al-Assad was asked about the fate of Syrian oil resources during a parliamentary session, he replied, “It is in good hands.” In order to simplify the facts about the Syrian oil sector — avoiding exaggeration and circumlocution — it is important to note that a Syrian National Competitiveness Observatory report estimated Syrian reserves at around 2.5 billion barrels. That amount would last for 18 years with a production rate of 337,000 barrels per day. 

Oil production constitutes around 24% of Syria’s GDP, 25% of budget revenues and 40% of export revenues. Oil fields are located at three major sites: the first in the north-east of the country at al-Suwaidiyah and al-Ramilan, the second in the Euphrates basin at the Omar and Taym fields, where the biggest light crude oil reserve is situated, and the third in the Syrian desert. Oil exploration in Syria dates back to the 1930s, while oil pumping began in the 1960s. Only since the 1980s have foreign companies been allowed to work in the oil sector alongside state-owned companies.

Syria has two oil refineries, one in Homs and the other in Baniyas. Regarding natural gas, exploration was carried out in the Syrian desert and the Euphrates fields. Moreover, the regions along the Syrian coast look promising in that regard. In 2005, Inseis, a Norwegian company, explored offshore regions and acquired 5000 km (roughly 3100 miles) of two-dimensional data. This data was later handed over to another Norwegian company that specializes in analyzing field surveys. An oil wealth amounting to 30 billion barrels in around 13 coastal fields was discovered. Additionally, a 2 to 4 km (1.2 to 2.5 miles) wide region, believed to be rich in oil, was not included in the study.

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It was determined that four fields out of the 13, extending from the Lebanese border to the city of Baniyas on the Syrian coast, contain an amount of oil equivalent to all of Kuwait’s reserves. These fields alone are able to produce 1.6 billion barrels per day. The production rate of the remaining oil fields, which constitute 35% of all of Syria’s fields, falls somewhere in between Kuwait and Iran’s rates. This data clarifies the role Turkey is playing in the conflict. In the same context, Russia has sent a ship to explore the Syrian waters, opening to door for further exploration and conflict.

The confirmed natural oil reserves amounted to 300 billion cubic meters, equivalent to 0.1% of the world total. In 2010, daily production amounted to 800 million cubic feet, an increase of 300 million cubic feet in the average production rate.

Two years after the outbreak of the armed revolution, questions remain regarding the fate of Syrian oil. After European and American sanctions were imposed on the oil sector in an attempt to constrain the authorities and help topple the regime, Syria has started to look for buyers for an amount of 110 to 150 thousand barrels of crude per day. Previously, 99% of this amount was exported to Europe. As a result, Syria was rendered weak when it came to price negotiations; instead of receiving $107 per barrel, according to international prices, the buyers imposed a price of less than a $100 per barrel, leaving the sector dramatically damaged.

In the light of the economic turmoil, the Syrian government has formed a committee to study floating the prices of diesel until it reaches international rates. It has in fact raised prices to 23 Syrian pounds (32 cents) per liter. When the Syrian conflict started, these same prices were decreased from 25 to 15 Syrian pounds (35 cents to 21 cents) per liter. Later, in order to cover the expenses of its military campaign, the government raised diesel prices to 20 Syrian pounds (28 cents) at first and to 23 Syrian pounds (32 cents) at later stages. On the other hand, activists have circulated information about large fires in the oil fields in the east of the country. It is said that insurgents have taken control of oil sites — pipelines in particular — and set them on fire. They also established a perimeter around oil spills, in order to fill containers and sell the oil in other regions.

Residents from the town of Mayadin — located near the Omar oil fields, which have been under rebel control since Nov. 27 — are reporting clashes between insurgent groups and the Free Syrian Army (FSA). The latter has taken over large parts of Deir el-Zour and al-Raqqah.

The FSA denies any links to these groups, while 15-year-old activist Omar al-Hamid stated, “Many pipelines are still functioning in the area under the protection of the FSA, while others are no longer operational.”

The residents of some regions have taken advantage of the oil leaks to obtain fuel for heating purposes, only to later discover that this fuel has carcinogenic side effects that have exacerbated health problems. “The use of stolen crude oil leads to several health problems and environmental concerns, ranging from cancer to pollution. The residents are oblivious to these facts. Recently, skin and respiratory diseases have become endemic in the towns where crude is being stolen. Additionally, a skin disease known as ‘Habbat Halab’ has spread in the rural and agricultural areas of Deir ez-Zour,” said Dr. Sultan, a resident of Deir el-Zour.

Immeasurable losses

The losses were not only limited to the theft of oil and dozens of deaths from cancerous fumes. Oil experts are discussing dangerous numbers. In an official report, Syria’s deputy oil minister revealed that the oil sector was severely damaged by recent incidents of mugging, arson and sabotage.

It is clear that the gas and diesel crisis has witnessed increasing demands, given the citizens’ needs for heating fuel. The electricity sector was also affected, as it became difficult to deliver gas and oil to power stations. Electricity rationing and rolling power cuts increased. Another source from the oil ministry, speaking on condition of anonymity, said that the Syrian Oil Company has suffered losses amounting to 374.2 million Syrian pounds ($5.2 million), while the losses resulting from the delay of production in its fields have reached 216.5 billion Syrian pounds ($3.1 billion).

The losses incurred by the Petrol Company for the Distribution of Petrol Derivatives are estimated at more than 1.4 billion Syrian pounds ($19.8 million), while the losses of the Syrian Company for Oil Transport have exceeded 1.5 billion Syrian pounds ($21.2 million). The Syrian Natural Gas Company has suffered losses of 567.6 million Syrian pounds ($8.04 million), while the Syrian Geological Society endured losses and damages worth 42.6 million Syrian pounds ($603,000). The general estimate of the cost of attacks on oil lines until mid-2012 is $29 million, of which $22 million is attributed to the cost of wasted oil and burned gas resulting from the bombing of export lines. Greedy people have set their eyes on the oil wells, as oil thieves have implemented the rule of “all or nothing.” They even set several pipelines ablaze if one party refused to accept the distribution of “gains.” Some oil thieves justified their act by saying that they are extracting small quantities and refining them to provide fuel for transport and heating during the cold winter weather.

These opportunists benefiting from the crisis were not satisfied with stealing crude oil alone. They also stole exploration and drilling tools, in addition to equipment and pipelines connected over a distance of 100 kilometers (62 miles). Videos recently posted online have shown the burglary of several heavy drilling and exploration tools and equipment, with an estimated value in the millions of dollars. This equipment is then sold as scrap for thousands of Syrian liras.

Amid all this, not enough has been done to protect Syrian oil. Syrian government sources revealed that the cabinet has agreed, in principle, to sign contracts to protect the oil facilities, crude oil transport lines, oil derivatives and oil transport vehicles. The government has also agreed to establish a governmental committee and pass into law contracts with private security companies affiliated with Shabbiha militias. These companies have recently been licensed to protect the oil lines and derivatives.

These companies contribute to 5% of the total amount of oil. Some militias present in regions with oil fields have taken on the responsibility of protecting the fields from common thefts. Mustafa Ali, age 28, from Deir al-Zour noted that “the FSA has set up checkpoints on the roads in liberated regions to stop oil smuggling and punish the thieves. Citizens await effective results when it comes to  in punishing culprits. Culprits are pursed, and they cut off the hand of anyone who allows himself to steal the country’s resources and claim them as his own, regardless of his affiliation or ranking.”

The image of a lost fortune in Syria appears. While this fortune is not huge, it is enough to provide an important source to rebuild the country in the coming years, after the bloody nightmare is over.

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Found in: syrian oil companies, syrian economy, syrian crisis, syrian conflict, syrian, oil, economic, bashar al-assad
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